Being CEO doesn't always mean getting paid the most

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Chris Ratcliffe/Bloomberg

Facebook Chief Operating Officer Sheryl Sandberg was paid $16.1 million in compensation in 2013, while CEO Mark Zuckerberg received less than $1 million, mostly in the form of personal use of company aircraft.

Nolan Archibald, who retired as executive chairman of Stanley Black & Decker Inc. in March 2013, was paid $52.5 million last year, almost five times more than Chief Executive Officer John Lundgren, according to company filings. That was also the highest pay among executives at 338 Standard & Poor’s 500 Index companies that have filed proxy statements for last year, according to data compiled by Bloomberg.

Sheryl Sandberg, the billionaire chief operating officer of Facebook Inc., Bank of America Corp.’s Thomas K. Montag and Occidental Petroleum Corp.’s Ray Irani also were among 27 executives who received higher compensation than their CEOs last year, the data show. Archibald’s compensation include a cash bonus of about $51 million tied to Stanley Works’s $4.4 billion purchase of Black & Decker Corp. in March 2010.

“The future performance of Stanley Black & Decker will tell us if this bonus was for actions that contributed to the long-term success of the company or if this was nothing more than a contractual agreement entered into at the time of the merger,” Frank Glassner, CEO of Veritas Executive Compensation Consultants, said in a phone interview from the company’s San Francisco headquarters.

Archibald’s pay was 41 percent higher than Viacom Inc. CEO Philippe Dauman, who received the second-most pay of the 338 companies, according to the data, which compiled the highest- paid executives as reported in the summary compensation table for S&P 500 companies with a fiscal year-end of Sept. 1, 2013 or later, and that have filed proxy statements for 2013 as of the market close yesterday.

Cost Cuts

Stanley Black & Decker, the New Britain, Connecticut-based power-tools maker, credited Archibald for at least $350 million in cost cuts from the deal. He’d served as Black & Decker’s chairman since 1987. Lundgren, who had been Stanley’s CEO since 2004 and is now running the combined company as chairman and CEO, received $10.7 million in 2013, according to the company’s proxy statement filed last month.

“You create problems with these payouts that are disconnected from the pay for the rest of organization,” Charles Elson, director for the John L. Weinberg Center for Corporate Governance at the University of Delaware, said in a phone interview. “Do the other employees involved in those savings take home a similar amount? The answer is no.”

Future Performance

Summary compensation tables are mandated by the U.S. Securities and Exchange Commission and show some awards in the year they’re granted rather than for the year they’re earned. Some awards are restricted, vesting and paying out over a set time frame, and the receipt of others may depend on future performance goals. The summary compensation table also counts changes in pension and the value of perks.

Bank of America, the second-largest U.S. lender by assets, paid co-Chief Operating Officer Montag more than CEO Brian T. Moynihan in 2013 for the third straight year. Montag, who runs the company’s investment banking and markets divisions, received $15.1 million versus Moynihan’s $13.1 million, according to the Charlotte, North Carolina-based lender’s summary compensation table data.

“It could be a case where the compensation committee would want to pay the CEO more but they feel like it’s going to be a lightning rod for negative attention,” Eric Hosken, a partner at New York-based Compensation Advisory Partners, said of companies that pay other employees more than the CEO.

More Pay

Summary compensation table data often differ from awarded pay, or what a board of directors deems appropriate to compensate an executive for a particular year’s performance. On an awarded basis, Montag has been granted more pay than Moynihan for four consecutive years. For 2013, Montag was awarded $15.5 million, including a $5.8 million cash bonus. Moynihan was granted $14 million, including $12.5 million in stock grants and no cash bonus, according to the bank’s proxy statement.

Lawrence Grayson, a spokesman for Bank of America, declined to comment.

Occidental’s Irani, who stepped down as CEO in 2011 after 20 years running the company, was paid $20.6 million in 2013, or three times more than CEO Stephen Chazen, who received $6.9 million. Chazen has agreed to receive no bonuses for the remainder of his tenure as CEO after collecting a combined $60.2 million in 2011 and 2012, the company’s summary compensation table shows.

Shareholder Criticism

Irani, 79, left the Los Angeles-based oil producer amid criticism from institutional shareholders, such as the California State Teachers’ Retirement System, who said his pay was excessive. He received average annual compensation of about $80 million between 2001 and 2013, according to data compiled by Bloomberg.

His 2013 compensation included a $14 million cash termination payment, and Occidental estimates it will have to pay $1.3 million a year for Irani’s future personal benefits, according to its proxy statement. Melissa Schoeb, a spokeswoman for Occidental, declined to comment.

“It’s all contractual,” University of Delaware’s Elson said. “It’s the peer group process at work. And people love to have Occidental in their peer group for that reason.”

Facebook’s Sandberg, 44, who has worked for the world’s largest social network since 2008, received $16.1 million in 2013. Mark Zuckerberg, the company’s 29-year-old billionaire co- founder and CEO who draws a $1 salary, received less than $1 million, mostly in the form of personal use of company aircraft, according to the company’s proxy statement.

‘In Together’

“This is a very good pay for performance program,” Glassner said of Sandberg’s pay, $15.2 million of which is in the form of restricted stock units which will begin vesting in 2017. “It certainly reflects a culture of ‘we’re all in this together.’”

Company founders will often be paid less than other executives at their firm because they already have a large equity stake, Compensation Advisory Partners’s Hosken said. Larry Page and Sergey Brin, co-founders of Google Inc., were paid $1 last year, while Executive Chairman Eric Schmidt received $19.3 million.

Zuckerberg collected $3.3 billion last year after exercising stock options to purchase 60 million shares, the firm’s proxy statement shows. He sold 41.35 million of those shares in a secondary offering by Facebook in December. Zuckerberg has a net worth of $26.6 billion, while Sandberg’s fortune is valued at $1.1 billion, according to the Bloomberg Billionaires Index.

Page has a net worth of $30.4 billion, and Brin’s fortune is valued at $30.3 billion, according to the Bloomberg index. Schmidt’s net worth is $8.7 billion.

“The view is they already own 10 percent of a company, what’s the value of giving them additional equity?” Hosken said.

External Hires

Michelle Gass, chief customer officer of Menomonee Falls, Wisconsin-based Kohl’s Corp., also was paid more than the company’s CEO. Gass, who joined the company in June 2013, received $12.1 million last year, compared to the $8.2 million paid to Chairman and CEO Kevin Mansell, according to a filing from the department-store chain.

External hires tend to be more expensive than promoting from within, said Robert Newbury, director of executive compensation research at Towers Watson.

Gass’s pay included a $1 million signing bonus and $8 million in stock awards to compensate her for equity grants lost when she left her position as president of Europe, Middle East and Africa operations at Starbucks Corp., according to the Kohl’s proxy statement.

“A football team that doesn’t have a good quarterback — if you don’t have the talent on the bench — you’re going to go out and make a trade,” Newbury said.

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